Wednesday 20 August 2008 03.00 EDT
First published on Wednesday 20 August 2008 03.00 EDT

If you want proof the world has a water problem you're better treading the damp summer pavements of the City than the parched bed of the Aral Sea.

Goldman Sachs says water is the next oil and has bullish investment trends to prove it. For the rest of us a water boom spells trouble: investors can smell scarcity a mile off and, however much money they pump into managing it, the last result they'll want is abundance.

It will be our plates, not our rates, that bear the brunt of water shortage. As today's report from WWF spells out, the amount we spew out of taps is piddling compared with what it takes to make stuff and, especially, to grow our food.

The volumes involved are staggering: the 200 billion litres a second it takes to grow the world's food is like gulping down the Amazon day in, day out. In the UK, we use about 58 bathtubs full of water every day, both directly and in the food we eat and the clothes we wear, and 62% of that comes from other countries. We're eating dry Lake Naivasha in Kenya and Australia's Murray River, as well as running down our own reserves.

But our water problem isn't just about the amount we use. Quality is as crucial as quantity. Whether water is clean, dirty or briny, comes from groundwater or from rainfall, and its whereabouts, can make all the difference.

To tackle water scarcity we need to remind ourselves why it is a problem. The most obvious reason is that we just can't keep using water at current rates. In practice, running low on a resource can mean that rich places like the UK barely notice while poor people take the hit.

But we've been there already with water – other countries have suffered from scarcity for decades – and we're now at the point where even the big-name companies that feed us are feeling the squeeze and getting seriously worried about the security of their supply chains.

But, just because this problem is now affecting rich countries, it doesn't mean we'll carry our fair share of the burden. So the second problem is injustice, destroying other people's livelihoods as we try to sort out our own supply problems. Just as pulling the rug from under the people who grow our airfreighted fruit and veg due to concerns over air miles is a problem, so too for water-scarce regions.

Then there are ecological consequences of water scarcity: desiccation and poor water quality can destroy species and ecosystems.

So, how to fix the water crisis? The good news is that we're not short of opportunities. The bad news is that many just swap one problem for another. The simplest technical fix is to use water more efficiently. The huge gap between the leakiest and most watertight irrigation systems shows we could get plenty more crop per drop.

More ambitious is desalination – already big in the Middle East, on the up in Spain and Australia, and plans are even afoot in London. The trouble with turning seawater fresh is the cost in money, energy and greenhouse gas emissions, not to mention the brine you're left with at the end.

The economist's fix is to put a price on water. That we need to value water more is clear but everything hinges on how you go about it. Pricing water doesn't work if people use it on the sly – there are around half a million illegal wells in Spain alone – and it can push water out of reach of people who most need it to those who can most afford it.

The foodie fix is to change what we eat. Meat is so thirsty that a vegetarian uses about half the water of a carnivore. The fact is that we will have to eat differently – the cost will force us to whether we want to or not. But if we want to be ahead of the game, the devil is in the detail: crops such as rice are heavy water users while extensive livestock can in fact tread quite lightly. One crucial shift may be towards crops more amenable to rain-watered farming, which uses only what is available. The fact that two-thirds of the world's food isn't irrigated right now reminds us this isn't an impossible dream.

Food is right at the heart of water scarcity but changing what we eat is just one part of the solution. Unless we get better policies in place too, we're likely to displace the problem instead of solving it, replacing irrigated Spanish greenhouses that supply our winter salads with irrigated Spanish golf courses.

So we need to do more with our food than simply eat a diet for a drier planet: as customers, shareholders and concerned citizens, we need to persuade food companies to put their political clout to good use, supporting fair ways to govern water in the places that they buy from. That means involving all water users, including those who can't pay for it, in setting priorities and making sure that their needs and those of the environment are met. It means valuing water, not merely as a commodity, but as the very stuff of life.

· Tom MacMillan is executive director of the Food Ethics Council, which earlier this year published Water: the ethics of efficiency